Testimony of Rachel A. Volberg. Associate Professor. School of Public Health & Health Sciences. University of Massachusetts Amherst

Transcription

1 Testimony of Rachel A. Volberg Associate Professor School of Public Health & Health Sciences University of Massachusetts Amherst Before the House Energy and Commerce Committee Subcommittee on Commerce, Manufacturing, and Trade Hearing on The State of Online Gaming Rayburn House Office Building, Washington, DC December 10, 2013

2 Summary of Testimony Online gambling is a fluid and dynamic market characterized by significant inter jurisdictional inconsistencies. As a result, policymakers, operators and other stakeholders face substantial ambiguities about the best approach to legalizing and regulating online gambling. My testimony today addresses several issues: (1) whether there will be an increase in the number of problem gamblers as a result of legalizing online gambling; (2) vulnerable populations; (3) the importance of funding research as well as treatment and prevention; and (4) the importance of balancing revenue generation and consumer protection. 1

3 Good morning Chairman Terry, Ranking Member Schakowsky, and Members of the Subcommittee. Thank you for inviting me to testify this morning. My name is Rachel Volberg. I am an Associate Professor at the University of Massachusetts Amherst School of Public Health and Health Sciences. I have specialized in population studies of gambling and problem gambling for 28 years. The Current Situation and Recent Developments Online gambling has only existed since 1995 and, around the world, jurisdictions continue to experiment with a range of approaches to legalization. Some jurisdictions prohibit most or all forms of online gambling; at the other end of the spectrum are governments that permit nearly all forms of online gambling. In the middle are jurisdictions that have put in some legal restrictions, those that provide for a domestic online market with patronage restricted to their own citizens, those that also prohibit residents from accessing online gambling outside the country, and those that operate online gambling but prohibit their own residents from accessing the sites (Williams, Wood, & Parke, 2012; Wood & Williams, 2009). For many years, the United States lay at the prohibition end of this spectrum. As recently as 2006, Congress passed the Unlawful Internet Gambling Enforcement Act (UIGEA) which made it illegal for financial transaction providers to transfer funds to online gambling sites. In the wake of this legislation, a significant number of online gambling sites stopped taking bets from U.S. citizens. Despite the law, many U.S. players were able to circumvent UIGEA by using non U.S. financial transaction intermediaries to place bets. While overall participation in online gambling in the United States is quite low (estimates range from 0.3% to 3.0%) (Rasmussen Reports, 2006; Welte, Barnes, Wieczorek, Tidwell, & Parker, 2002), a recent survey of international online gamblers found that 25% of the respondents were from the United States (Wood & Williams, 2009). 2

4 In December 2011, the Department of Justice issued a ruling declaring that the Wire Act, the major federal anti gambling statute, applied only to bets on sports events and races. This announcement opened the door for individual states to offer any form of already legal intra state gambling in an online format. In the two years since the DOJ ruling, Nevada passed legislation legalizing online poker while Delaware and New Jersey legalized online gambling more generally. Eight other states, including California, Hawaii, Illinois, Iowa, Massachusetts, Mississippi, Pennsylvania and Texas are considering legislation to authorize online gambling in Two states, Georgia and Illinois, now allow sales of lottery tickets online with Florida and Massachusetts considering a similar move (National Conference of State Legislatures, 2013). H.R provides for Federal oversight of state and tribal agencies that will issue licenses for online poker through a newly established Office of Internet Poker Oversight within the Department of Commerce. This office will have the responsibility to prescribe minimum standards for qualifying these state and tribal agencies although each agency will establish its own requirements for the development of a Compulsive Gaming, Responsible Gaming, and Self Exclusion Program that licensees will need to implement as a condition of licensure. H.R does include several minimum requirements such as informational materials about responsible gaming and self exclusion; individualized responsible gaming options such as self imposed limits on deposits, time and bet amounts, and access to funds; and a selfexclusion program. H.R also requires state and tribal agencies to adopt any additional practices that the Department of Commerce recommends to protect consumers, specifically citing the National Council on Problem Gambling s Internet Responsible Gambling Standards, and amends the Public Health Service Act to give SAMHSA authority to address problem gambling. While these are improvements over an earlier version of this bill, the approach proposed in H.R still guarantees that requirements for programs to prevent and mitigate gambling related 3

5 problems will vary significantly across the states. There is already tremendous variability in existing efforts to address problem gambling in the United States, with per capita expenditures on problem gambling services, including prevention, treatment and research, ranging from $1.42 in Delaware to less than one cent in Colorado (Marotta, Armentano, Vander Linden, & Whyte, 2013). With each state responsible for its own consumer protection and harm minimization requirements, and with states invariably competing with one another for players and revenues, some states will implement far less restrictive online gambling regimes than others and players, migrating to these less restrictive sites, will not benefit from the tools that are put in place to protect consumers and prevent gambling problems. While competition among online gambling providers ensures a cost efficient and appealing consumer product, a free market is likely to come at the cost of less player protection (Williams, West, & Simpson, 2012). Finally, while establishing minimum consumer protections at the federal level will be helpful, these measures will not be adequate without a mechanism to adequately fund prevention, treatment and, most importantly, research on problem gambling in the United States. While the language in H.R directing SAMHSA to take primary responsibility to address problem gambling is a good first step, the United States lags far behind other countries in addressing problem gambling. As I testified two years ago before this committee, state funding for problem gambling prevention, treatment and, most especially, research in the United States is approximately one twentieth of the level in countries such as Australia and Canada and there is no dedicated federal funding for problem gambling services at all (Volberg, 2011). 4

6 A Likely Increase in Problem and Pathological Gambling Prevalence (or total stock) of a disorder is determined by incidence, or the inflow of new cases, duration, and the outflow of current cases through recovery, migration or death (Abbott, 2006). In the study of clinical disorders, pathological gambling (renamed disordered gambling in the DSM V) is considered a chronic disorder. Chronic disorders strongly tend to recur once fully developed, constituting a lifelong vulnerability. This vulnerability to relapse may be effectively treated and kept in check. But a period in which the individual is relatively free of symptoms does not mean that the person is free of the disorder. There is substantial research showing that the prevalence of problem gambling is three to four times higher among online gamblers compared to non Internet gamblers (Griffiths & Barnes, 2008; Jonsson, 2012; Ladd & Petry, 2002; Wood & Williams, 2007, 2009). In a California survey that I directed in 2006, although only 2% of our respondents had ever gambled on the Internet, 11% of these individuals were classified as pathological gamblers and another 19% were classified as subclinical problem gamblers. In a logistic regression analysis that controlled for individual demographics and cooccurring behaviors and disorders, respondents who had gambled on the Internet in the past year were ten times more likely to be a problem or pathological gambler compared with those who had not gambled on the Internet (Volberg, Nysse Carris, & Gerstein, 2006). One reason that legalization of online gambling may lead to an increase in the rate of problem gambling is that legalization provides tacit governmental approval for these activities and leads citizens to assume that the products are safe. This in turn typically leads to an increase in overall participation, as is also seen in the legalization/decriminalization of prostitution, abortion, and cannabis (Alan Guttmacher Institute, 2008; Jakobsson & Kotsadam, 2011; MacCoun, 2010; Wardle, Griffiths, Orford, Moody, & Volberg, 2011). Increases in overall gambling participation are reliably associated with 5

7 increases, at least temporarily, in the prevalence of problem gambling (Grun & McKeigue, 2000; Lund, 2008; Williams, Volberg, & Stevens, 2012). Another reason that legalization is likely to increase rates of problem gambling is because the nature of online gambling makes it inherently more problematic than most other forms of gambling. Greater convenience, easier access, the solitary nature of play, the ability to play when intoxicated, the lack of realistic cash markers, and the ability to play multiple sites and/or games simultaneously are all features that contribute to a diminution in players ability to control their involvement. Another challenge is that online problem gamblers have a much more difficult time avoiding gambling venues which are available at the click of a mouse (Schull, 2005; Wood, Williams, & Lawton, 2007). Most things that go up usually come down and this is as true in epidemiology as in other realms. Epidemiological research strongly suggests that problem gambling prevalence does eventually level out and decline, even if accessibility continues to increase (Williams, Volberg et al., 2012). Greater public awareness, expanding services for problem gamblers and regulatory, industry and public health measures are among the likely contributors to such declines. What is not known is how quickly these and other factors can have a significant impact. It is also not known if these factors can prevent problem escalation even if introduced concurrently with increased access to gambling (Abbott, 2005; Abbott, Volberg, Bellringer, & Reith, 2004). For many years, it was widely assumed that as gambling opportunities increased, there would be corresponding increases in the prevalence of problem gambling and related harms. Evidence from studies of gaming industry employees (Guttentag, Harrigan, & Smith, 2012; Hing & Gainsbury, 2011; Shaffer, Vander Bilt, & Hall, 1999; Wu & Wong, 2008) as well as population surveys in the United States and other countries (Abbott & Volberg, 2000; Gerstein, Volberg, Harwood, & Christiansen, 1999; Pearce, Mason, Hiscock, & Day, 2008; Productivity Commission, 1999; Sévigny, Ladouceur, Jacques, & Cantinotti, 6

8 2008; Shaffer, LaBrie, & LaPlante, 2004; Storer, Abbott, & Stubbs, 2009; Welte, Wieczorek, Barnes, Tidwell, & Hoffman, 2004) led researchers to conclude that there was a link between the availability of gambling and the prevalence of problem gambling. All of the studies cited above are single cross sectional surveys rather than studies that examine changes in problem gambling prevalence in the same jurisdiction over time. A recent study that I undertook with two Canadian colleagues looked all of the 202 problem gambling prevalence studies that were carried out internationally between 1975 and 2012; developed weights to adjust for the main methodological differences that independently influence problem gambling prevalence rates obtained in surveys; and applied these weights to create standardized problem gambling prevalence rates for all of the studies (Williams, Volberg et al., 2012). The following chart presents our summarized results for the Australian states, the Canadian provinces and the U.S. states. Standardized Problem Gambling Prevalence Rates over Time (5 Year Smoothed Averages) 4.5 Problem Gambling Prevalence (%) Australia Canada United States 0.0 7

9 Stated generally, we found that problem gambling rates started increasing in North America and Australia beginning in the late 1980s to early 1990s and achieved a peak in the late 1990s and early 2000s. This period is roughly coincident with the most rapid introduction and expansion of gambling opportunities in these countries, the greatest increase in per capita gambling expenditure and significant increases in the overall rate of gambling participation. There has been a general worldwide downward trend in both gambling participation and problem gambling rates beginning in the late 1990s for North America and the early 2000s for Australia and other countries. Current rates are now very similar to what they were in the late 1980s prior to the expansion of casino and slot machine gambling. Considering that gambling availability has increased in most jurisdictions over the past 30 years, these results provide support both for the contention that increased gambling availability is related to increased problem gambling and the contention that populations tend to adapt over time. We believe that there are several mechanisms likely responsible for decreasing problem gambling prevalence, including increased awareness of the potential harms of gambling (creating less susceptibility); decreased overall participation in gambling (due to greater wariness as well as the novelty having worn off); people being removed from the population pool of problem gamblers due to severe adverse consequences deriving from their gambling (e.g., bankruptcy, incarceration, suicide); increased industry and/or government efforts to provide gambling more safely, to enact programs to prevent problem gambling, and to provide treatment resources; and the increasing age of the population. Although problem gamblers may eventually overcome difficulties related to their gambling, most of the financial, psychological, social, work/school and legal harms associated with problem gambling cannot be undone (Gainsbury & Wood, 2011; Williams, Wood et al., 2012). Given this scenario, it is essential that regulatory policies take account of likely increases in problem gambling in the wake of the legalization of online gambling in the United States. 8

10 Protecting Vulnerable Populations Problem gambling is not distributed evenly throughout the population and there is good evidence that some groups in the population are more vulnerable to developing gambling related problems than others. Internationally, males, adolescents and young adults, non majority ethnic groups, and individuals with low income, low occupational status and less formal education have been found to be at higher risk for problem gambling. In relation to online gambling, concerns about vulnerable groups tend to focus rather narrowly on young men and early youth surveys in North America found that people in their mid to late teenage years had higher prevalence rates than adults. However, there is emerging evidence that online gamblers may be different from those who gamble in other ways. For example, several studies have found that rates of online gambling are higher among women than among men (Ialomiteanu & Adlaf, 2001; Svensson & Romild, 2011; Wardle, Moody, Griffiths, Orford, & Volberg, 2011). With older adults showing the fastest growth in adoption of online technologies, it is possible that this subgroup in the population may be at increasing risk. This is particularly true since older adults tend to have the lowest levels of participation in traditional forms of gambling. In an analysis of surveys in several states that I conducted some years ago, I found that there had been a marked increase in the proportion of problem gamblers who were women in half of these jurisdictions while, in the others, the proportion of problem gamblers who were men had increased (Volberg, 2004). In three of the states, the proportion of problem gamblers who were non Caucasian (mainly Native American) had also increased significantly. These were all states that had substantial growth in the number of tribal casinos and casino style charitable gambling operations. From these studies, it appears that changes in the availability of particular types of gambling are instrumental in altering the demographic characteristics of problem gamblers. 9

11 In considering vulnerable populations, it is important to take note of some groups in the population with bimodal patterns of gambling participation. Compared to other groups in the population, members of these groups are less likely to gamble, overall. However, those who do gamble do so heavily. Groups in this category include some ethnic minorities and recent immigrant groups (e.g., African Americans in the U.S., Pacific Islanders in New Zealand and Eastern European immigrants in Sweden). These appear to be sectors of the population in the early stages of introduction to high risk forms of gambling. Some of these groups have exceedingly high levels of problem gambling (Abbott, 2001; Abbott, Volberg, & Rönnberg, 2004; Martins, Ghandour, & Storr, 2011; Welte, Barnes, Tidwell, & Hoffman, 2008). Understanding who is vulnerable to developing gambling related problems has relevance to both gambling policy and the development of effective interventions to prevent difficulties and assist those with problems. For example, legislation and policies that significantly enhance access to slot machines, table games and other continuous gambling forms can be expected to generate increases in disordered gambling. Risk profiles are also likely to change, with disproportionate increases among women and some other population sectors including ethnic and new immigrant minorities. Problem gambling may also move up market, becoming somewhat more evenly distributed throughout socioeconomic strata and age groups. 10

12 The Importance of Funding Research Formulating public policy is never easy. To construct rational public policy, decisions must be based on accurate assessments of the likely impacts of any given action. However, to make such assessments requires information which requires, in turn, empirical research. Internationally, research serves an increasingly critical role in informing gambling policy and regulation. This work goes well beyond questions of problem gambling prevalence to address critical issues related to the provision and regulation of commercial gambling issues such as the positive and negative impacts of legalized gambling, effectiveness of self exclusion and pre commitment programs and the impact of changes to gambling technology on players and profits. While experience in other jurisdictions clearly shows that independent research can play a vital role in minimizing the harms and maximizing the benefits associated with the provision of legal gambling, the miniscule amount spent on gambling research in the United States means that we know very little about how gambling in our country can be most safely provided. As I noted above, other countries spend far greater amounts on problem gambling services than the United States. Two years ago before this committee, I noted that funding for problem gambling services per capita in the United States is approximately one twentieth the level in some other countries (Volberg, 2011). In my testimony, I was comparing per capita funding for problem gambling services in the U.S. in 2004 with per capita funding for these services in several other countries, including Canada, Australia, New Zealand and South Africa (Volberg, 2009). Since 2004, spending on problem gambling services in Canada has grown from $44 million (USD) to $80 million (USD) (Canadian Partnership for Responsible Gambling, 2011) while the new government in the Australian state of Victoria has pledged to spend $31 million (USD) annually over the next five years on problem gambling services, up from $10 million (USD) in 2004 (Victorian Liberal Nationals Coalition, 2010). Although spending on problem 11

13 gambling services in the United States has risen since 2004, from approximately $25 million to $61 million, this increase is primarily due to the number of states that have legalized casino gambling since that time and are now providing publicly funded problem gambling services (Marotta et al., 2013). In addition to spending far more on problem gambling services in general, other countries dedicate substantially greater revenues to research on problem gambling. The proportion of overall expenditures on problem gambling services that goes to research ranges from 10% in Victoria, Australia to 25% in Sweden. The most recent survey of funding for problem gambling services in the United States found that less than 3% of the $61 million that states spent overall went to research (Marotta et al., 2013). In my home state of Massachusetts, the Expanded Gaming Act of 2011 requires that the Massachusetts Gaming Commission establish an annual research agenda to assist in understanding the social and economic effects of casino gambling in Massachusetts and in minimizing the harmful impacts. With the further requirement that the Commission and its Gaming Policy Advisory Committee make annual, scientifically based recommendations to the Legislature, the new law is unique in enshrining the role of research in enhancing responsible gambling and mitigating problem gambling in Massachusetts. While the Public Health Trust Fund that will support programs dedicated to addressing problem gambling (including the annual research agenda) has not yet been established, the Massachusetts Gaming Commission has elected to spend significant resources of its own to conduct a Baseline Study prior to the introduction of casinos in Massachusetts. These research findings will help inform how monies from the Public Health Trust Fund are expended, assist in assessing community level impacts, improve problem gambling prevention and treatment, and provide all of the stakeholders in Massachusetts with a neutral database for strategic analysis and decision making. 12

14 We have learned some recent salutary lessons about the willingness of state governments to provide help for vulnerable populations. Such funding tends to be highly vulnerable to changes in government and in economic circumstances, as recent decisions by several states to reduce or eliminate existing funding for problem gambling services demonstrate (Berzon, 2011). To ensure the long term budgetary health of such programs, language is needed within any federal bill legalizing online gambling to assure that a reasonable level of funding for problem gambling services is made available and preserved over time and to also assure that research will be undertaken to keep the federal government as well as state governments informed about new developments and emerging best practices in preventing and treating problem gambling. Finally, I believe that separating research from other mitigation efforts, such as treatment and prevention, is important in order to focus beyond narrow concerns with disability and consider the full spectrum of gambling behavior and the broad array of institutions concerned with these activities from an empirical perspective. At the federal level, this approach is clearly reflected in the separation between the Substance Abuse and Mental Health Services Administration (SAMHSA) which oversees prevention and treatment issues and the National Institutes of Health (NIH) and the National Science Foundation (NSF) where basic research is carried out. Balancing Revenues and Consumer Protection Across many jurisdictions, gambling operators and governments are constrained by the profit motive in their willingness and ability to minimize and mitigate the harms arising from the introduction of new forms of gambling. The extent to which best practices for problem gambling minimization and mitigation will be adopted is often influenced by pressures from politicians, senior officials, industry lobby groups and other advocates. 13

15 Governments, in particular, face conflicting incentives in relation to gambling legalization between maximizing revenues from gambling operations and protecting the health of their citizens. Most legislation legalizing gambling in the United States has emphasized the importance of revenues; rarely is mention made of the importance of consumer protection. However, as one New Zealand regulator told me some years ago, if it isn t in the legislation, then regulators can t regulate it. He was pointing to the importance, in the New Zealand Gambling Act of 2003, of the multiple aims of the legislation. These were to control the growth of gambling, prevent and minimize the harm caused by gambling, ensure that money from gambling benefits the community, and facilitate community involvement in decisions about the provision of gambling. To my knowledge, this was the first time that any legislation recognized consumer protection and the role of communities as essential elements in the regulation of gambling. That is why I am proud of the legislation that was passed two years ago in Massachusetts. In addition to permitting three casinos and one slot parlor, the Expanded Gaming Act like the New Zealand Gambling Act of 2003 makes it clear that the intention in introducing casino gambling in Massachusetts is to provide the greatest possible economic development benefits and revenues to the people of the Commonwealth while reducing to the maximum extent possible the potentially negative or unintended consequences of the new legislation. The effort to reduce the potentially negative consequences of casino gambling in Massachusetts includes establishment of a Public Health Trust Fund, where 5% of the tax revenues generated annually by the new casinos will be deposited and from which monies will be distributed for problem gambling research, prevention and treatment. 14

16 Conclusion While online gambling offers better possibilities, compared to land based forms of gambling, to implement player protection measures, there are unmistakable challenges in providing these tools and ensuring that the players most in need of protection actually use them. If online poker is legalized at the federal level in the United States, it will be important to ensure that these tools are available to players on all licensed sites. It will also be important to establish an independent agency through which these tools are made available to players in order to overcome the reluctance demonstrated to date by the online gambling industry to implement cross operator player protection tools (Dragicevic, 2011). Online gambling is clearly here to stay and will continue to evolve with competition among Internet gambling sites, with new demographic groups such as women and older adults entering the market, and with a growing number of jurisdictions legalizing and regulating these activities. The question is what governments can and will do to create a safety net for their citizens, to minimize the likely increase in the number of problem gamblers, to provide treatment for those afflicted, and to ensure that research is undertaken to understand the impacts of online gambling on society (Gainsbury & Wood, 2011). Thank you again for the opportunity to testify. I look forward to answering your questions and to assisting the Subcommittee in its future deliberations. 15

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20 Witness Background Statement I am an Associate Professor in the School of Public Health and Health Sciences at the University of Massachusetts Amherst. For the past 28 years, I have specialized in conducting population studies of gambling and problem gambling. At UMass Amherst, I am the Principal Investigator of the Social and Economic Impacts of Gambling in Massachusetts (SEIGMA) study ( This is a large multidisciplinary, multi year project funded by the Massachusetts Gaming Commission whose findings will assist in assessing a broad array of community, regional and state level impacts of the introduction of casinos in Massachusetts, improve problem gambling prevention and treatment efforts, and provide all of the stakeholders in Massachusetts with a neutral database for strategic analysis and decision making. In addition to my position at the University of Massachusetts, I am President of Gemini Research, Ltd., a Massachusetts based company established in I also hold a professorial appointment at the Auckland University of Technology in New Zealand. Over the past five years, my projects have been funded under grants or contracts with government agencies in Australia, Britain, Canada, New Zealand, Singapore and Sweden. I have completed several small consulting assignments for gaming operators or suppliers in this period, including review of a proposal to evaluate a responsible gambling program for Betfair, a British online gaming company. 19